DriveNow’s Independent Contractor Problem: Why Does It Matter?

DriveNow, which operates electric car sharing services in the San Francisco Bay area, was recently sued in a California state court by one of its drivers, Marcelo Costas. The allegations against DriveNow, a BMW subsidiary, include violations of federal, state, and city labor laws.

Costas alleges that DriveNow classified him, as well as other drivers, as independent contractors rather than employees. He asserts that the company set their schedules, provided all tools, and controlled all aspects of their work.

DriveNow uses a cellular phone application that allows a customer to locate and reserve a car on a map. After the vehicle is reserved, the customer picks up the vehicle and drives it to his or her destination location. DriveNow hires drivers such as Costas to charge vehicles when batteries become low, to move the vehicles from place to place, and to clean the vehicles, when needed.

The core of the lawsuit is that DriveNow improperly classified Costas and other drivers as independent contractors to avoid labor laws that were unfavorable to the company, such as minimum wage and overtime requirements, required breaks and meal periods, and mandatory payroll deductions. For example, under federal and state laws, employees performing functions similar to the DriveNow drivers would be entitled to a minimum wage and to overtime pay. Conversely, independent contractors have no such rights.

If a worker is truly an employee, an employer cannot just call him or her an independent contractor and avoid labor laws. If an employer attempts to do this and is challenged in a lawsuit, a court will ultimately decide whether the worker is an employee or is actually an independent contractor. Unfortunately, this is not always easy to determine. In California, different tests are used by the courts to determine whether a person is an employee or an independent contractor, and it is this classification that drives whether employee rights have been violated.

By law, employees can bring an action under the Private Attorneys General Act to enforce state labor laws.

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